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Thorsten Heins' First Call as RIM CEO: BlackBerry is Not the Only Fruit

It seems that, like “Voldemort”, there are some words it’s best not to say on your first morning as a smartphone company’s CEO. Asked about the possibilities of either licensing or splitting hardware and software up into separate divisions (coincidentally making a sale easier later), Research in Motion’s newly-appointed President and CEO Thorsten Heins first cited his experience of device-only market segments, and the cut-throat nature of their price competition. He went on:

There are not many companies that have [an integrated OS, service and hardware offer]. One is the other fruit company, and one is us, and I want to leverage it.

It’s hard for any phone player to avoid the shadow of Apple, and for Blackberry it is harder than most – not only because of their karponymic brands, or that integrated hardware and software play, but because Apple has conquered in just those markets where RIM has stumbled – the high-end consumer smartphone, and in particular the US consumer market.

No burning platforms for RIM?

By the numbers, Mike Lazaridis and Jim Balsillie have left Heins with some strong cards. He cited 75 million daily users of Blackberry services, and 55 million users of BBM, the free inter-device messenger service which made the BlackBerry such a natural choice for impecunious texting addicts in markets outside the US, and is now being assailed by the other fruit company’s iMessage and cut-cost iPhone 3GS. RIM is not exactly on its uppers – it reported revenues of nearly $20 billion in 2011, and had around $1.5 billion in cash at its last quarter’s report.

However, Nokia was hardly short of cash when Stephen Elop sent out his now-legendary “Burning Platform” memo. Investors do not look for companies that seem to be deflating over time, or which might burn cash in the hope of recapturing past glories. Heins’ task is to reassure that RIM is on neither of these paths. While also selling some phones.

Bumps in the road

Heins’ narrative is this: RIM expanded quickly – from $294 million revenues to $20 billion in a decade. When he joined in December 2007, RIM was still, in his words, behaving like a startup. Over that time of rapid expansion, it has hit some bumps in the road. However, the road ahead is clear and clearly mapped out. The acquisition of QNX has provided the OS for the next decade of development. The PlayBook 2 tablet’s release in February will showcase the state of the QNX-based OS, and establish a beachhead for mobile computing products extending outside the phone and tablet space. BlackBerry 10 will arrive this year, integrating phone and tablet OS as Google aims to with Ice Cream Sandwich.

Heins’ correction of Richard Kramer of Arete Research when he asked about RIM’s penetration of the low end of the market was telling, The RIM line is that this is the “entry-level smartphone segment”. The cheap BlackBerry handsets are designed to wean users off feature phones as a “non-disruptive landing point” – a smart phone that is not alienatingly smart. Then, when they are ready, they can be migrated up to more profitable BlackBerry products and services.

Things to do

Clearly, however, there are things to be done – not many companies in rude health find their joint CEOs recommnending their own replacement, as Balsillie and Lazaridis did in their report to the board. Theirs were not the only voices calling for change, it might reasonably be said. In the last two years, according to Canalys research, RIM’s share of the US smartphone market hollowed out from nearly 50% to 9%, as Apple and Android staked out the consumer space.

The first PlayBook’s launch in April 2011 saw little enthusiasm, even in RIM’s traditionally powerful enterprise space. Then there were the service outages last October, which made the integration of platform, hardware are infrastructure look suddenly vulnerable. RIMM stock reached an annual closing high of $69.86 on 18 February 2011, after an upgrade to Buy by Citigroup earlier that week. More recently, it has climbed since its closing low on 20 December of $12.52, but largely on the possibility either of a partial or complete sale as its market cap dropped, or the removal of the current executive.

Hein’s two immediate priorities are marketing and execution. On marketing, RIM has begun the search for a Chief Marketing Officer. A particular target is the US consumer market, where Apple and Android dominate. On execution, Heins noted that he had seen product teams innovating during the product design stage, and identified this as something that has to stop. No names were named, but one might consider the BlackBerry Storm, the 2008 release which went up against the iPhone and HTC’s T-Mobile G1 with enough rough edges to be decried by the ‘New York Times’ influential David Pogue as a dud.

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